CARPE DIEM

Tuesday, January 17, 2012

Top 500 U.S. Manufacturing Firms Had 2011 Sales of $5 Trillion, Almost As Much as Japan's GDP

The 500 largest U.S. manufacturing firms operate in 28 different industries. Here are the 10 largest manufacturing industries, based on those firms:

Rank

10 Largest U.S. Manufacturing Industries, 2011

Revenue (Millions)

Examples

1

Petroleum & Coal Products

$1,274,150

Exxon, Chrevron, Conoco

2

Computers & Other Electronic Products

$709,613

HP, IBM, Apple, Dell

3

Chemicals

$406,445

P&G, Dow, DuPont

4

Pharmaceuticals

$306,076

J&J, Pfizer, Merck and Co.

5

Motor Vehicles

$303,540

Ford, GM, Harley-Davidson

6

Food

$284,469

General Mills, Kellogg, Campbell

7

Aerospace & Defense

$254,126

Boeing, Lockheed Martin

8

Electrical Equipment & Appliances

$244,738

GE, Emerson, Whirlpool

9

Machinery

$227,481

Caterpillar, Deere, Xerox

10

Beverages

$120,356

Pepsi, Coke, Snapple

Total

$4,130,994

IndustryWeek recently released its annual ranking of the 500 largest publicly held U.S. manufacturing companies in 2011 based on sales revenue, and the top ten U.S. manufacturing industries (of 28 total industries for the Top 500 companies) are displayed above. Here are some factoids:

1. The combined sales revenue (including global sales) of the top 500 U.S.-based manufacturing firms for 2011 was $5.13 trillion, which was a 12.75% increase over 2010 sales of $4.55 trillion. To put it in perspective, that amount of annual revenue ($5.13 trillion) of the 500 largest U.S.-based manufacturing companies was almost as much as the $5.8 trillion of GDP for the entire economy of Japan in 2011 (world's third largest economy).

3. Annual sales of $1.27 billion in 2011 for America's single largest manufacturing industry - petroleum and coal products - was larger than the GDP of both Mexico and South Korea, and larger than the Gross State Product of both Texas and New York.

4. Annual sales of $709 billion for America's second largest manufacturing industry - computers and other electronic products was more than the entire GDP last year of Switzerland ($594 billion) and almost as much as the GDP of Turkey ($797 billion) and the GSP of Florida ($754 billion).

5. The top ten largest U.S. manufacturing companies (Exxon, Chevron, Conoco, GE, GM, Ford, H-P, IBM, Valero, and Proctor and Gamble) had combined revenues of $1.57 trillion, almost as much as Canada's GDP in 2011 of $1.75 trillion.

MP: The comparisons above help put the enormous size of the U.S. manufacturing sector into perspective and demonstrate that American manufacturing is not withering and disappearing, but thriving, expanding and prospering. In terms of profits, the American manufacturing sector will have its best year ever in 2011. Based on data currently available through the third quarter, the U.S. manufacturing corporations are on track to earn more than $600 billion in profits for 2011, which will be a new record high, and double the profits in both 2008 ($266 billion) and 2009 ($286 billion), and 36% above the pre-recession level of $442 billion in 2007. American manufacturing is alive and well.

Quote of the Day on Disparities in Achievements

"Gross inequalities in skills and achievements have been the rule, not the exception, on every inhabited continent and for centuries on end. Yet our laws and government policies act as if any significant statistical difference between racial or ethnic groups in employment or income can only be a result of their being treated differently by others.

Nor is this simply an opinion. Businesses have been sued by the government when the representation of different groups among their employees differs substantially from their proportions in the population at large. But, no matter how the human race is broken down into its components -- whether by race, sex, geographic region or whatever -- glaring disparities in achievements have been the rule, not the exception."

Markets in Everything: Roll-Your-Own Cigarettes

"A South Carolina store owner said smokers can get cigarettes without paying state and federal taxes because of a tax loophole. M.J. Farah, owner of Jake's One Stop in Pelzer, South Carolina is offering customers the chance to roll their own cigarettes.

"The customers are taking advantage of a tax cut. They don't have to pay the taxes on the tobacco if they are making it on their own," said Farah. "I have people who drive all the way up here 45 minutes just to come get their tobacco."

Farah recently got three new machines that stuff the cigarettes for customers. He was already selling roll-your-own supplies, but the new machines are less time-consuming and still save smokers money."

Gallup's Jobless Rate Falls to 8.3% in Mid-January

PRINCETON, NJ -- "U.S. unemployment, as measured by Gallup without seasonal adjustment, is 8.3% in mid-January -- a slight improvement from 8.5% in December, and down from 9.9% in January a year ago. Gallup's mid-month unemployment reading, based on telephone interviews of a random sample of 18,500 adults in the 30 days ending Jan. 15, serves as a preliminary estimate of the U.S. government report, and suggests the BLS will likely report on the first Friday of February that its seasonally adjusted unemployment rate declined once again in January.

The U.S. government's January unemployment rate that it will report in early February will be based on mid-month conditions. Therefore, Gallup's mid-month unemployment reading, based on data collected through the 15th of the month, normally provides a good estimate of the government's unadjusted unemployment rate for the month. Because of employer layoffs after the holidays, unadjusted unemployment rates normally increase at this time of year, and the government seasonally adjusts for these layoffs. So it seems likely that the government will report another decline in its seasonally adjusted U.S. unemployment rate for January.

Regardless of what the government reports, Gallup's unemployment and underemployment measures show modest improvement so far in January, and that is particularly positive news for job conditions at this time of year because the early part of the year is usually slow for hiring. This is good news for the overall U.S. economy. It is also a plus for the president's re-election efforts."

Top 20 Predictions for Life 100 Years From Now

1) Oceans will be extensively farmed for fish, energy, algae, and natural resources, 2) Telepathic communication will become common, 3) Immortality, 4) Ability to control the weather, and 5) Only three languages (English, Spanish and Mandarin).

New York State Manufacturing Expands in January; The Six-Month Outlook is Highly Optimistic

The Empire State Manufacturing Survey indicates that manufacturing activity expanded in New York State in January. The general business conditions index climbed 5.3 points to 13.5, and the 5 point gain in January follows strong increases of 8 points in November and 7.4 points in December (see brown line in chart).

According to the NY Fed, "The new orders index rose eight points to 13.7 and the shipments index inched up to 21.7. The prices paid index was positive and slightly higher than it was last month while the prices received index jumped twenty points to 23.1, indicating a significant pickup in selling prices. Employment indexes were positive and higher, pointing to higher employment levels and a longer average workweek."

The future indexes conveyed a high degree of optimism about the six-month outlook, with the future general business conditions index rising 9.26 points to 54.9, its highest level since January 2011 (see blue line in chart). That follows gains of 18.1 points in November and 13.5 points in December, and that 41 point gain in the future index over the last three months is the largest three-month gain in more than ten years.

Low Natural Gas Prices Help Families, Businesses

"The market has been overwhelmed with gas," says Anthony Yuen, a commodities analyst at Citibank. He and other analysts expect the price to average near $3 for all 2012. If the weather stays mild, the price could even dip below $2, a level not seen since 2002.

Cheap natural gas is mainly a good thing for the economy:

• More than half of U.S. households use natural gas for heat, and a quarter of the nation's electricity is made from it. Falling heating and electric costs are offsetting the impact of high gasoline prices and enabling families and small businesses to spend on other things. Residential gas and electric customers are saving roughly $200 a year, according to a study by Navigant Consulting.

• For companies that make plastics, fertilizer and other chemicals derived from natural gas, falling prices are a windfall. The same goes for makers of products from steel to bricks to beer. All use a lot of natural gas to heat their furnaces. U.S. manufacturers are becoming more competitive globally as a result of the country's cheap natural gas, industry officials say."

Powerpoint Version of "I Have a Dream" Speech

"Martin Luther King's "I Have a Dream" speech would have been even more successful if Dr. King had two things that have vastly improved in the last 47 years: (1) presentation software, and (2) the evocative jargon used by "social entrepreneurs" trying to change things. Using my expert knowledge of these two areas, I was able to improve the "Dream" speech considerably in this Powerpoint presentation."

U.S. Exports to China Have Increased by 21% per Year Since 2005, Twice the 11% Growth in Imports

As much as we continually hear about China's currency manipulation to artificially increase its exports to the U.S., the chart above shows something very interesting. When: a) monthly U.S. exports to China, and b) monthly imports from China, are both normalized to equal 100 in January 2005, we can see that U.S. exports to China have actually grown much faster (about 21% per year) than imports from China (about 11% per year). Over the 7-year period from January 2005 to November 2011, U.S. exports to China have increased almost four times while imports from China have only doubled.

Another way to describe the trend: in 2005, there were about $6 of imports from China for every $1 of exports to China, and by 2011 the ratio of Chinese imports-to-U.S. exports to China had fallen to less than 4. Conversely, the ratio of U.S. exports-to-Chinese imports has risen from 17% to 26% since 2005.

Also, the current level of monthly imports from China (about $36-38 billion) is only slightly higher than the $34 billion peak in 2008 during the recession, while the current volume of U.S. exports to China (about $10 billion) is more than 50% above the $6.5 billion peak as the recession started in late 2007.

Although we still have a trade deficit with China, its relative size (in relation to the total volume of trade with China) has been shrinking over time. As disposable incomes increase in China and as more Chinese enter the new middle class there, their purchases of American goods have increased at a faster rate than our purchases of their products. That's a trend that we can expect to continue.

A Man's Home is the Government's Castle in NYC

In December I had a post about James Harmon, an owner-occupant Manhattan landlord who is going all the way to the United States Supreme Court with his legal claim that New York City’s rent control laws constitute an illegal seizure of his five-story brownstone property on W. 76th Street without just compensation, and violate the Constitution’s contracts clause.

Nicole Gelinas, contributing editor to the Manhattan Institute’s City Journal, has an excellent editorial about NYC rent control laws and James Harmon's legal case in today's NY Post, appropriately titled "A Man's Home is the Government's Castle."

The Dental Cartel Objects to Competition from Dental Therapists, Out of Concern for Public Safety

"Try finding a dentist in the remotest rural or deepest urban pockets of the land, and for blatantly economic reasons, they just aren’t there. That’s why states are looking to fix the problem by creating a so-called mid-level dental provider, sometimes referred to as a dental therapist or advanced dental therapist. Much like a nurse practitioner (NP) or physician assistant (PA) is to a doctor, this provider would be educated and licensed to perform basic dental services -- routine checkups, cleanings, filling cavities and extracting teeth -- under the supervision of a fully trained dentist. These providers would be charged with providing care in underserved areas."

MP: Sounds like a great innovative alternative that would make dental care more available, convenient, and affordable, right? Sure, unless you're a member of the "dental cartel," aka the American Dental Association, and you don't appreciate the possibility of increased competition for your services. Here's more from the article:

"In much the same way that the American Medical Association fought against the creation of NPs and PAs, the American Dental Association (ADA) and its state chapters are lobbying hard to thwart state legislatures as they work to create this new level of dental care providers, who are common and well liked in other parts of the world."

MP: It's probably not too surprising that the dental cartel's main publicly stated objection to the creation of a new level of dental provider is their concern about the public's "safety." The cartel's possible loss of business from increased competition hasn't been mentioned, but I think we know better, don't we?

Medicare Sets 6 Billion Prices Across the Country; Is There Any Chance Those Are the Right Prices? NO

"Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.

Yet Medicare is potentially setting about 6 billion prices across the country at any one time. Is there any chance that Medicare can get all those prices right? Not likely.

What happens when Medicare gets them wrong? One result: doctors will face perverse incentives to provide care that is costlier and less appropriate than the care they should be providing. Another result: the skill set of our nation’s doctors will become misallocated, as medical students and practicing doctors respond to the fact that Medicare is overpaying for some skills and underpaying for others.

The problem in medicine is not merely that all the prices are wrong. A lot of very important things doctors can do for patients are not even on the list of tasks that Medicare pays for."

MP: These problems sound a lot like the deficiencies of Soviet-style central planning in general when the government, rather than the market, sets prices, see Economic Calculation Problem.

Dear College Student......

"First, I do not “take off” points. You earn them. The difference is not merely rhetorical, nor is it trivial. In other words, you start with zero points and earn your way to a grade.

Second, this means that the burden of proof is on you to demonstrate that you have mastered the material. It is not on me to demonstrate that you have not.

The fact that you “don’t understand” why you didn’t earn full points for a particular question might itself help explain why you didn’t earn full points. Don’t take this personally or interpret it as a sneer. See it as a learning opportunity.

Markets in Everything: The Beer Mitten

CBS News: 12 Clean Energy Firms Received $6.5B in Taxpayer Money, And Are All in Financial Trouble

A CBS News investigation has found a pattern of the government pouring your tax dollars into clean energy.

CBS NEWS --"It's been four months since the FBI raided bankrupt Solyndra. It received a half-billion in tax dollars and became a political lightning rod, with Republicans claiming it was a politically motivated investment.

CBS News counted 12 clean energy companies that are having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five have filed for bankruptcy: The junk bond-rated Beacon, Evergreen Solar, SpectraWatt, AES' subsidiary Eastern Energy and Solyndra.

Others are also struggling with potential problems. Nevada Geothermal -- a home state project personally endorsed by Senate Majority Leader Harry Reid -- warns of multiple potential defaults in new SEC filings reviewed by CBS News. It was already having trouble paying the bills when it received $98.5 million in Energy Department loan guarantees."

Markets in Everything: Rent Your Stuff

A marketplace where you can rent almost anything.

RentStuff.com -- "We connect people with other people (and rental businesses) nearby to rent out their everyday stuff such as sporting goods, camping gear, musical equipment, grills, lawn mowers, tools, tech gadgets and more. RentStuff.com makes it effortless for people to connect with friends, neighbors, local people and businesses in order to find stuff they need or make money by lending out stuff they own but are not using."

VIDEO: The Hidden Beauty of Pollination

A New World Energy Map is Emerging. Exhibit A: Natural Gas Glut in America Fuels An Export Debate

Natural gas futures contracts for February closed at $2.67 (per million BTUs) in trading Friday on the NYMEX (see chart above). That's the lowest closing price since March of 2002, almost ten years ago, and that's not adjusted for inflation. In real terms, it's the lowest price since 1999. As VangeIV and some others have pointed out in the comments section, $2.67 is likely far below the actual cost of producing natural gas for most companies.

As this Houston Chronicle article points out, natural gas is selling for as much as $12 per million BTUs in Europe (see chart) and as high as $18 in some Asian markets (that's "off the chart" above!). Andrew Ware, a spokesman for Houston-based Cheniere Energy, is quoted in the article saying "We have so much natural gas coming up that we don't know what to do with it."

Well, it seems like a natural solution to our "glut" would be to export America's cheap, abundant American natural gas to Europe and Asia and allow U.S. companies to take advantage of the huge price difference, but that's generating some controversy as the article points out:

"Debate is brewing over whether to keep the nation's glut of natural gas at home for cheap energy or export it at five times the price, possibly creating jobs and boosting the domestic economy. Businesses that purchase natural gas for industrial and residential use have rallied against proposals to liquefy and export the fossil fuel to Asian and European nations willing to pay much higher prices.

Nine companies have sought federal approval to export about 10 billion cubic feet of liquefied natural gas per day, which would boost prices for U.S. customers. Cheniere Energy's Sabine Pass LNG plant in Louisiana already has won approval to ship out more than 2 billion cubic feet of liquefied natural gas a day.

There's little doubt that exports will cause the price of natural gas to rise. The debate is whether the rise in gross domestic product and gas field employment might offset the negative effects of higher domestic energy prices."

MP: It's quite an interesting development that the U.S. now has such an abundant supply of domestic natural gas thanks to the shale revolution that we're now having a debate on whether American companies should be allowed to export gas.

The debate over natural gas exports is more evidence that a new world energy map is emerging, and it is centered not on the Middle East but on the Western Hemisphere as Daniel Yergin pointed out recently in the Washington Post.

Very few people predicted the historic "game-changing" domestic energy developments that have emerged in 2010 and 2011. And Yergin provides some insight on why that is - "The transformation is happening not as part of some grand design or major policy effort, but almost accidentally. This shift was not planned — it is a product of a series of unrelated initiatives and technological breakthroughs."

U.S. Shale Oil Revolution Has Only Just Begun

"If independent U.S. oil producers are right, last year was only a taste of the transformation that is coming to America’s oilpatch. Some optimists are already forecasting huge increases by 2015, perhaps taking U.S. oil production up by some two million barrels per day to 8 million bpd by then.

Both the expertise of the industry and huge amounts of investment capital are already moving into less established shale plays hoping to replicate the success that has already materialized in North Dakota and Texas, which put these places on oil traders’ lips as the unprecedented slump in West Texas Intermediate crude oil prices compared to globally-traded grades.

Well, get ready to learn a few more names.

Perhaps you have heard of the Utica Shale in Ohio now, where Total has just splashed out more than $2 billion on a prospect that is still in its infancy — production is essentially nil today— but which promoters say could be the next Eagle Ford shale. But have you heard of Colorado’s Niobrara shale, California’s Monterey Shale, Oklahoma’s Mississippi Lime Shale, the Tuscaloosa Marine Shale in central Louisiana or the Lower Smackover Shale that stretches from Northern Louisiana into Arkansas?

Every single one of those places, and others throughout the United States, are currently being combed over by cash-rich independent oil companies hoping to find the next big oil play."

According to today's BEA report on international trade in goods and services for November, the top two U.S. export categories were: 1) petroleum products ($5 billion) and 2) fuel oil ($4.78 billion), see chart above of the top 15 November exports. On a year-to-date basis through November, those same categories are the top two exports for 2011.

See previous CD post here about how the U.S. will be a net exporter of petroleum products in 2011 for the first time in 60 years.

Six Big Results of $3.53 Natural Gas in 2012

The U.S. Energy Information Administration is forecasting $3.53 for the average annual spot price of natural gas in 2012 (see chart above), which will be almost 12% lower than the average price this year of $4 per million BTUs. In the first few weeks of this year, the spot price of gas has been below $3 (data here).

What are the six big results of $3.53 natural gas in 2012? According to energy expert John Hanger:

1. "Still lower natural gas bills for consumers, with a residential consumer saving probably another $45 on top of the $500 per year the gas price drop from 2008 has already provided.

2. Still lower electricity bills for those consumers in competitive electricity markets where natural gas pricing importantly impacts electricity prices. All other things being equal, another 50 cent decline in gas prices could reduce electricity bills by about 0.5 cents per kilowatt-hour and save electricity consumers about $50 during 2012. This $50 saving would be added to $500 per year in electricity costs that lower natural gas prices have already provided.

3. Lower natural gas bills and electricity bills will again prevent a broad energy shock, even though oil prices are at record levels for a full year and would go much higher if conflict with Iran erupts.

4. Another decline in the number of producing shallow, traditional gas wells in Pennsylvania will take place.

5. Gas will continue to displace coal in electricity generation. Power plants that can run on either coal or gas will use gas. More decisions will be made to convert coal plants to gas. Gas's electricity generation market share will rise and coal's fall to below 43%, into the 42% zone.

6. More natural gas displacing coal and oil will cut carbon emissions and other pollutants like soot and mercury. US carbon emissions will likely fall in 2012, in significant part due to natural gas.

John Hanger's Bottom Line: The 2012 pricing may well be the new floor on gas pricing. It is really hard to see how prices can go any lower, given that gas demand is rising, more drilling rigs are moving to oil, and prices are so low that more marginal wells are being shut in. EIA itself is forecasting an increase in gas prices for 2013 to $4.14, up but sill low.

Finally, perhaps another year of record gas supplies and establishing a new floor on gas prices will mean that the ridiculous smear that shale gas is a "Ponzi Scheme" and those that spread it will be ridiculed by one and all in 2012. I am not counting on that one, but another year of low, low natural gas prices looks almost guaranteed."

The Energy Treasures Beneath Our Feet

From an editorial by Pete Jermann, a self-employed craftsman and home-schooling father from Olean, New York (full article here, shorter version here):

"To look on the treasures beneath our feet as a threat to our comfort rather than a contribution we can make to a more vibrant world economy, one that multiplies wealth rather than redistributes a static wealth, is simply selfish.

When we accept no risk in our own backyards, we have no right to expect it of those whose backyards have provided us with the gas we use to heat our homes, the electricity we use to drive our appliances, and the fuel we use to go to and fro. In all fairness, if we are not willing to accept this risk, we should turn out our lights, turn off our home entertainment centers, turn off our heat and learn how to scratch a basic existence out of our own backyards.

The Marcellus Shale and many other resources in this country can be mined responsibly, but none of it can be done completely without risk. There is neither progress nor freedom without risk. It is foolhardy to think that a life without risk is even possible. It is foolish to think that risk always favors the do-nothing position. The risk of doing nothing is the risk of poverty and stagnation. I think history will show that to be the greater risk.

The perfect world will be found in neither poverty nor prosperity. But one is better than the other. Prosperity will always be messy. There will always be accidents waiting to happen and unforeseen consequences. However, history shows — particularly the history of the United States — that more people live better lives when they are willing to take those risks and deal with the consequences as they occur."

Thursday, January 12, 2012

Mortgage Rates Fall to New Historic Lows and Help Boost Nov. Miami-Area Home Sales to 5-Year High

Mortgage rates fell again this week, and 30-year fixed rates (3.89%), 15-year fixed-rates (3.16%) and one-year ARMs (2.76%) are all at their lowest levels in history (see chart above).

Related: "Miami-area homes sold at the fastest pace for a November in five years as lower prices and mortgage rates continued to drive robust demand from investors and vacation-home buyers - both foreign and domestic."

MP: It's a sign that market forces are working - lower prices and lower mortgages rates stimulate demand for home sales in Miami.

U.S. Life Expectancy Reaches New High of 78.7 Yrs.

Life expectancy in the U.S. increased to a new all-time high of 78.7 years in 2010, according to data released yesterday by the government. The chart above shows the significant correlation between real GDP per capita and life expectancy in the U.S. from 1929 to 2010.

For a longer interactive graphic from Gapminder that covers the period from 1800 to 2010 showing the relationship between U.S. life expectancy and real GDP per capita, go here.

Personal Bankruptcy Filings Decline 11.6% in 2011

"Fitch Ratings says personal bankruptcy filings declined for the first time in four years in 2011, as economic conditions improved marginally during most of the year and consumers reigned in borrowing and paid down existing debt. According to National Bankruptcy Research Center figures, U.S. personal bankruptcy filings declined 11.6% from 2010. The results bettered Fitch's more moderate 5% decline forecast for the year. Actual filings fell 176,892 from 1,530,078 in 2010 to 1,353,186 in 2011.

The results helped drive the rapidly improving collateral performance in consumer Asset-Backed Securities (ABS) sectors throughout 2011. Notably credit card chargeoffs, which are directly affected by bankruptcy filings, fell significantly throughout the year, declining more than 37% from year-end 2010 to year-end 2011 (see chart above). Bankruptcy filings typically comprise 20%-30% of credit card chargeoffs while contractual defaults make up the rest. Lower consumer bankruptcies have a less profound, but still important, effect on auto ABS, given the utility and importance of the car to the borrower. Nonetheless, lower filings do have a positive effect on default frequencies, all else being equal."MP: The chart above was featured on this recent CD post, and shows that for consumer credit cards, the delinquency rate in Q3 2011 fell for the 9th consecutive quarter to 3.47%, which was the lowest level since a 3.46% reading in the first quarter of 1995, more than 16 years ago (see blue line in chart). This downward trend in credit card delinquencies to a 16-year low helps explain the significant decline in personal bankruptcy filings last year.

A Most Incredible End to a College Football Game

The video above shows a last-minute touchdown after 15 separate lateral passes, and the announcer hyperventilates that "it might be the most sensational, incredible ending in all of Division 3 football."

Markets in Everything: Smart Contact Lenses

PITTSBURGH (CBS) — "Forty-million Americans wear contact lenses. In the not so distant future, contacts may do a lot more than just help you see. What if the lenses could look inside of you to diagnose, monitor and even treat disease? Sound far-fetched? Well, it may not be too far away.

The new generation of contact lenses is being called “smart lenses,” and they are packed with circuits, sensors and wireless technology – all designed to keep an eye on your health.“There’s a possibility to develop a really, really important new tool for medicine,” said Babak Parviz, PH.D., the developer of the Smart Lens."

Wednesday, January 11, 2012

Recommended: FRED Add-In for Microsoft Excel

I use the Federal Reserve Economic Data (FRED) from the St. Louis Federal Reserve on almost a daily basis and for those of you that also access these data on a regular basis, you might be interested in the free "FRED Add-In for Microsoft Excel" available here.

According to the St. Louis Fed,

"This Add-In is free software that will significantly reduce the amount of time spent collecting and organizing macroeconomic data. The FRED add-in provides free access to over 30,000 data series from various sources (e.g., BEA, BLS, Census, and OECD) directly through Microsoft Excel.

MP: I just downloaded the FRED Add-In and tried it out, and it works great. It does save time by accessing FRED data directly in Excel, compared to going to the FRED website, downloading datasets in Excel format and then opening those datasets in Excel. To help get started you can review the 5-minute tutorial video on the Fed's website.

Dynamic Market Pricing Reduces Congestion on the 520 Bridge, With Maybe Some Help from an App?

In early December, a CD post featured a Seattle-based company called Seabalt Solutions, which developed an app called Toll Avoider to help drivers avoid the new dynamically-priced tolls on the Highway 520 bridge that started in late December.

After just a few weeks following the implementation of the bridge tolls, the Seattle Times is reporting that:

"New tolls on the Highway 520 bridge have reduced traffic so much that drivers are commonly traveling at 65 mph, maybe three times as fast as they're used to. Bryan Bucklin, of Seattle, estimates that his former 35- to 40-minute ride from Microsoft to Montlake is now as short as 15 minutes.

Motorists are diverting to other roads, chiefly the toll-free Interstate 90 bridge."

MP: Maybe the mobile app, in addition to the dynamic pricing, is contributing to the reduction in traffic on the 520 bridge?

2. Among the successful job seekers, 62.4 percent found employment in academic institutions as compared to 62.8 percent in the 2009-10 year.

3. Respondents to the current survey report a mean actual salary for the 2010-11 academic year of $87,596 or 6.6 percent below what was expected.

4. For Ph.D. granting institutions, the mean actual salary in 2010-11 was $98,542, compared to an average of $115,000 for the Top 30 economics departments, and an average of $75,612 for bachelor and masters degree-granting institutions.

Tuesday, January 10, 2012

North Dakota Sets More Oil Production Records in November; Above 500k Daily Barrels for First Time

The "Economic Miracle State" of North Dakota pumped another record amount of oil during the month of November at a daily rate of 509,754 barrels, which was 43% above last year's output, and the first time that the state's daily production exceeded 500,000 barrels (see chart above, data here). Oil production in the Peace Garden State has more than doubled from 246,000 barrels per day two years ago, and North Dakota is now producing enough oil to completely displace the imports of crude oil from Colombia (364,000 bpd) or Iraq (422,000 bpd).

Other highlights of the November production report:

1. The number of wells producing oil in the state increased to 6,060, which sets a new record, and exceeds 6,000 wells for the first time ever.

2. The amount of oil produced per well also reached a record high of 84 barrels per day in November, which is 50% higher than the 55 barrels per day two years ago, and probably reflects both increasing productivity from fracking technology and drilling in more productive areas.

3. The combination of a record number of wells producing oil at record-setting productivity levels has put North Dakota on a trajectory to surpass both California (539,000 barrels per day) and Alaska (555,000 bpd) this year to become the No. 2 oil-producing state in the U.S. At the current pace of record-setting monthly gains, North Dakota's oil production is currently on track to break the 600,000 barrels per day level by next March, break the 700,000 level by next August, and exceed 800,000 barrels per day by the end of this year. At that point, North Dakota oil could be enough to displace either Venezuela's or Nigeria's imports.

4. North Dakota's oil production has now surpassed OPEC-member Ecuador's daily production of 485,000 barrels.

As a result of the ongoing oil boom in the Bakken area, North Dakota continues to lead the nation with the lowest state unemployment rate at 3.4% for November, more than 5 full percentage points below the nation's average 8.7% rate for November. There are nine North Dakota counties with jobless rates at or below 2% for November, and Williams County, which is at the center of the Bakken oil boom, boasts the lowest county jobless rate in the country at 0.9%.

Bottom Line: The ongoing record-setting oil production in North Dakota continues to make it the most economically successful state in the country, with record levels of employment and income growth, increasing tax revenues, the lowest foreclosure rate in the country, a strong real estate market, and jaw-dropping jobless rates in many counties of the Bakken region below 2%.

Markets in Everything: Wi-Fi Quadricoptor Drone

Engadget -- "The new Parrot Drone touts much improved 720p HD video-recording capability, a revamped app with updated flight controls and features, along with revised hardware and reinforced hulls. We recently spent a few minutes with the smartphone-controlled UAV, so check out the quick video overview above."

Economics Blogs: "Dim Sum for the Mind"

From a report in the Chronicle of Higher Education about a panel discussion on economics blogs at the American Economic Association meetings that were held last week in Chicago:

"In an age of sophisticated social media and rapidly evolving technologies, blogs would seem to be about as sexy as a pair of sensible shoes. Yet as simple as they may be, blogs have also proven to be valuable to economists debating principles and policy, and to faculty looking to breathe life into the teaching of their discipline, speakers said here on Saturday.

"The virtue of blogs is that they're living, real-time, and they respond to what's happening in the real world," said Steven D. Levitt, a professor of economics at the University of Chicago who is co-author of the book Freakonomics and of a blog of the same name. He was one of several scholars who joined a panel discussion at the annual meeting of the American Economic Association on the topic of using blogs to teach undergraduate economics.

The role of economics blogs started changing noticeably around 2008, said Alex Tabarrok, an associate professor of economics at George Mason University. Before then, blogs were expected to be clever and entertaining, and little else."

Markets in Everything: CSA for Local Art

Michigan Radio -- "An arts advocacy group is stealing an investment idea from the agriculture world in an effort to get more folks to buy local art. A statewide arts advocacy group wants to serve up some fresh, local art. To do so, the group is copying an investment model popular in the agricultural world.

Lots of farms in Michigan participate in Community Supported Agriculture. Folks can buy a CSA share in a farm. In return, the shareholder gets a weekly crate of fresh farm produce.

Now ArtServe Michigan is launching a CSA for art in metro Detroit, based on a successful program in Minneapolis-St. Paul.

Cezanne Charles is with ArtServe. She said during the 3 month "growing season," which begins in April, shareholders will receive nine pieces of art from nine local artists: "This can be anything from...original small paintings, to the idea of doing like a limited edition 7-inch vinyl, to doing a short chap book of poetry or literary work," Charles said. Charles said 50 shares will be available March 5, and each share costs $350."

Monday, January 09, 2012

Let the Market Decide: Kodak and Post Office

Thomas Sowell on why the market should decide on the fate of the Post Office, just as it has decided the fate of Kodak, Montgomery Wards, Studebaker, Eastern Airlines, etc.

"Just as Kodak's technology made older modes of photography obsolete more than a hundred years ago, so the new technology of the digital age has left Kodak behind. Great names of companies in other fields have likewise vanished as new technology brought new rivals to the forefront, or else made the whole product obsolete, as happened with typewriters, slide rules and other products now remembered only by an older generation.

That is what happens in a market economy, and we all benefit from it as consumer Unfortunately, that is not what happens in government. The post office is a classic example.

Post offices were once even more important than Eastman Kodak, and for a longer time, as the mail provided vital communications linking people and organizations across thousands of miles. But, today, technology has moved even further beyond the post office than it has beyond Eastman Kodak.

The difference is that, although the Postal Service is technically a private business, its income doesn't cover all its costs — and taxpayers are on the hook for the difference. Moreover, the government makes it illegal for anyone else to put anything into your mail box, even though you bought the mail box and it is your property. That means you don't have the option to have some other private company deliver your mail."

The most important factor in U.S. competitiveness may be a decline in Chinese competitiveness:

The labor comparative gap that China has had has disappeared because the total costs of production for certain products have moved towards US costs. This is particular where labor costs are a smaller proportion of the total costs. Although readers may be feel that it is an exaggeration to claim that ‘off-shoring’ will immediately be reversed back to ‘on-shoring’, perhaps it is better to suggest that the ‘hollowing out’ of US manufacturing has reached its nadir. The worst of the transition is behind the US all other factors of production being equal. The important driver will be speed of productivity gains between the two countries that encourages CEOs to open and close plants in one or the other, not just the labour cost.

Jefferies is bullish on the U.S. economy too, expecting 2.5% GDP growth next year, strong enough to save the world from a Europe-led Armageddon. Last year Jefferies had the most accurate equity team on Wall Street."

MP: The chart above shows that over the most recent four-quarter period from 2010 Q3 to 2011 Q3, the U.S. manufacturing sector grew at 4.37%, or three times the 1.46% growth rate of the overall economy (real GDP), demonstrating that American manufacturing is at the forefront of the economic recovery.

Phoenix Home Sales Up By 9%, Prices Are Stable

DQ News -- "The number of homes that resold in the Phoenix area rose above a year earlier for the twelfth month in a row in November as activity increased across the price spectrum. A variety of median sale price measures trended higher month-to-month, and the region’s overall median sale price fell year-over-year by less than 1 percent – the smallest dip since the median began to erode consistently in summer 2010.

A total of 7,766 new and resale Phoenix area houses and condos sold in November, which was up 9.0% from a year earlier but down by 3.5% from October. Phoenix-area sales usually drop between October and November, with that decline averaging 7.1% since 1994.

The median price paid in November for all new and resale houses and condos sold in the Phoenix region was $127,000. That was up 5.8% from October but down 0.4% from a year earlier. November’s median was the highest since November 2010, when it was $127,500. Also, the year-over-year decline in the median was the lowest since the median began to drop consistently in July 2010."

MP: It's not a great report, but the Phoenix-area real estate market is starting to show some signs of a gradual recovery. Home sales increased by 9% in November over last year, led by especially strong sales gains for new homes (32.6%) and condos (10.4%). Median home prices have stabilized at around $127,000 for the last year as the market seems to have found a price bottom.

"The number of Phoenix-area home sales in 2011 climbed to their highest level since the housing market’s peak in 2006. Foreclosures fell to their lowest level since 2008. And the number of Phoenix-area homes listed for sale has dropped to a figure not seen since 2005, indicating demand is finally exceeding supply. This is a complete turnaround from 2007, when the housing crash started and cheap foreclosure homes flooded the market while buyers were few."

Quote of the Day: The Glory of the Market vs. the Compulsory Monopoly of Bureaucratic Government

"The essence and the glory of the free market is that individual firms and businesses, competing on the market, provide an ever-changing orchestration of efficient and progressive goods and services: continually improving products and markets, advancing technology, cutting costs, and meeting changing consumer demands as swiftly and as efficiently as possible.

The libertarian economist can try to offer a few guidelines on how markets might develop where they are now prevented or re­stricted from developing; but he can do little more than point the way toward freedom, to call for government to get out of the way of the productive and ever-inventive energies of the public as expressed in voluntary market activity. No one can predict the number of firms, the size of each firm, the pricing policies, etc., of any future market in any service or commodity. We just know—by economic theory and by historical insight—that such a free market will do the job infinitely better than the compulsory monopoly of bureaucratic government."

Sunday, January 08, 2012

Markets in Everything: Dynamic Pricing for Sports

Travel-related industries such as hotels, rental cars, and airlines have employed dynamic pricing techniques for years. Thanks to growing acceptance by sports teams and their fans, dynamic ticket pricing now represents the future of ticket pricing for both professional and collegiate sports, read about it here.

"Some restaurants will increase prices. Others will reduce the hours of employees on minimum wage. And others will find cost savings elsewhere.

For Chad Mackay, president and chief operating officer of the Mackay Restaurant Group, the minimum wage hike computes to an additional annual cost of around $50,000 for his company's five restaurants.

Mackay says he will reduce the scheduled hours for servers by starting shifts later and phasing them out earlier at the end of the evening.

“The increase in the minimum wage is one of these things that there’s a real financial cost,” Mackay said. “We don’t just sit back and take it. We have to run labor tighter.”

At Joey in Bellevue, like at Mackay Group restaurants, employee hours will be reduced to adjust for the difference.

“We are already making adjustments on how many people we are staffing at the beginning of the year because business is slower during that time,” said Nick Rehse, a shift leader and bartender at Joey. “We make adjustments to dial down the hours.”

MP: This example provides evidence that minimum wage workers are not necessarily better off with a higher minimum wage. With a reduction in hours thanks to that pesky downward-sloping demand curve for restaurant labor, minimum wage restaurant workers might actually see their weekly earnings go down, not up. And it also provides an example of how the number of workers employed might not be significantly reduced following an increase in the minimum wage, even when there could be a significant reduction in hours worked. Therefore, minimum wage workers could be made worse off with an increase in the minimum wage from reduced hours and income, even if it doesn't show up as an increase in the unemployment rate.

BCS: Record Ticket Prices for College Football

NOLA.COM -- "Monday night’s BCS showdown between Louisiana State University and the University of Alabama will crown a national champion. But the game appears likely to produce another title: highest-priced tickets ever for a college football game."

MP: At TicketsNow, the official ticket reseller ("scalper") for the BCS, 575 tickets are currently being offered for sale at prices ranging from $1,292 for seats in the upper levels to $5,460 for seats in the 13th row at the 50 yard line (see sample above of the highest-price seats).

Thanks to the Oil and Gas Boom, ND, AK and TX Have Regained All Jobs Lost During Recession

Despite the gradual improvements in the U.S. labor market and the drop in the jobless rate to 8.5% in December, the payroll employment level of 131.9 million jobs in December is still more than six million jobs below the 137.9 million peak level when the recession started in December 2007. In percentage terms, December payrolls were 4.5% below the December 2007 level, see the chart above.

In contrast to the ongoing "jobless recovery" at the national level, there are three states that have now regained all of the jobs lost during the recession: North Dakota, Alaska and Texas (see chart above). What do these three states have in common? They are all oil and gas rich, and have been adding thousands of mining and natural resources jobs over the last several years (12,000 in North Dakota, 2,200 in Alaska and 66,600 in Texas) to keep up with the increased domestic production of energy resources, mostly for shale gas and oil.

Friday, January 06, 2012

Chart of the Day: Historic Drop in Government Jobs

The chart above displays the annual change in total government employment (data here) and shows that the 589,000 reduction in government jobs between 2009 and 2011 was the largest reduction in government payrolls since the post-WWII period of 1945-1947. Total government employment (federal, state and local) in December 2011 was the lowest government payroll level since June 2006.

As I reported earlier today, the Great Recession has been responsible for downsizing the total government workforce more than any other event since WWII. And the loss of government jobs post-WWII was really just a reversal of the huge buildup in military forces from 1941-1943. If some of those 589,000 government jobs losses are permanent, wouldn't it be ironic if one of the legacies of the Obama administration was a long-term reduction in the size of government through reduced government employment? I don't think that was really the "hope and change" that Obama was planning on.

Update: Most of the government job losses have taken place at the local level (-511,000 jobs since December 2008) and some at the state level (-1114,000), while federal government employment has increased slightly over the last three years by 25,000 jobs.

Interesting Facts from Today's Employment Report

1. The unemployment rate for workers with a college degree fell to 4.1% in December, which is the lowest jobless rate for that group since January 2009, almost three years ago. The number of employed college graduates is at an all-time high of 45.2 million, and more than 1.6 million above the December 2007 level when the recession started. In contrast, the jobless rate for workers with less than a high school degree jumped to 13.8% in December from 13.3% in November, and the employment level for those workers remains 1.24 million jobs below the December 2007 level. This contrast suggests that educational level might be an important factor in the labor market improvements and the drop in the jobless rate to 8.5%, with college-educated workers being the group that is gaining jobs during the recovery, while the least educated workers are the group finding it hardest to find jobs.

2. The manufacturing sector added 225,000 jobs in 2011, following an increase of 109,000 factory jobs in 2010, bringing manufacturing employment to 11.79 million at year-end. That's the first time since 1996-1997 of two consecutive annual increases in employment by U.S. manufacturing companies, and the 225,000 job gain last year was the largest since a 304,000 increase in 1997. If manufacturing companies continue to add jobs at the current pace, it's likely that manufacturing employment by mid-2012 will exceed the 12 million mark for the first time since early 2009.

3. Government payrolls fell by 280,000 jobs in 2011, with most of the job losses taking place at the local (-181,000) and state level (-63,000), compared to a much smaller reduction in federal jobs (-36,000). The decline in government jobs in 2011 follows declines in 2010 (-223,000) and 2009 (-76,000), bringing the three-year loss of government jobs to 589,000, and lowering total government employment to the lowest level since June 2006.

The last time there were three consecutive years of government job losses was back in 1945-1947 following WWII, and the only comparable more recent example was a 300,000 government job loss in 1981 followed by a 92,000 job loss in 1982. But all of those government job losses were re-gained by late 1985, so it will be interesting to see if the current downsizing to a five and-a-half year low for government jobs remains in effect as the economy continues to recover. If some of the government jobs are not added back, the Great Recession might be responsible for a permanent reduction in the number of government jobs, or maybe that's just wishful thinking?

Rail Traffic Ends the Year With Strong Gains

"The Association of American Railroads (AAR) today reported gains in 2011 rail traffic compared with last year, with U.S. railroads originating 15.2 million carloads, up 2.2 percent over 2010 and up 9.7 percent over 2009. Total U.S. rail intermodal volume in 2011 was 11.9 million trailers and containers, up 5.4 percent over 2010 and up 20.4 percent over 2009.

In 2011, 14 of the 20 carload commodity categories tracked by AAR saw increases on U.S. railroads compared with 2010 indicating a broad recovery across industry sectors. The largest gains were: metallic ores, up 20.5 percent or 67,631 carloads; primary metal products, up 12 percent or 56,988 carloads; and petroleum products, up 11.1 percent or 36,811 carloads.

“A good beginning, some uncertainness in the middle, and then a good ending—that describes U.S. rail traffic in 2011,” remarked John Gray, AAR’s Senior Vice President for Policy and Economics. “We continue to see hopeful economic signs, as the industry prepares for 2012.”

AAR also announced gains in December 2011 rail traffic, with U.S. railroads originating 1,134,580 carloads, up 7.3 percent over December 2010, which is the largest year-over-year monthly increase since January 2011. U.S. rail intermodal originations totaled 873,390 containers and trailers, up 9.4 percent over December 2010. This is the second-highest monthly intermodal average for any December in history.During December 2011, 16 of the 20 carload commodity categories tracked by the AAR saw increases compared with December 2010."

MP: The materials moving daily around the country by rail are the "raw ingredients" (coal, grains, chemicals, lumber, minerals, paper, iron, steel, etc.) of American industry that are being delivered to a company, factory or plant somewhere in the U.S. for the next stage of processing. The annual gains in the volume of those raw materials being shipped by rail last year and the ongoing monthly gains in rail traffic, reflect the gradual recovery taking place in the U.S. economy, especially in the manufacturing sector. Increases in orders for the inputs delivered by rail in 2011 will translate into increases in final output (GDP) this year, which could also contribute to greater job growth in 2012.